IAASB amends ISA 250 to enhance auditor focus on non-compliance

The International Auditing and Assurance Standards Board (IAASB) has revised the ISA 250 auditing standard to improve auditor oversight of non-compliance with laws and regulations

It has revised International Standard on Auditing (ISA) 250 (Revised), Consideration of Laws and Regulations in an Audit of Financial Statements, and as a result has issued minor amendments to other ISAs to ensure compliance with a revised ethics code for auditors.

The changes were required in response to new requirements set out in the International Ethics Standards Board for Accountants’ (IESBA) code of ethics for professional accountants addressing non-compliance with laws and regulations (NOCLAR).

The main amendments include:

  • Align aspects of ISA 250 (Revised) to the revised IESBA Code, particularly the definition of non-compliance and the examples of laws and regulations within the scope of ISA 250 (Revised);
  • Clarify the requirement regarding the auditor’s determination of whether to report identified or suspected NOCLAR to an appropriate authority outside the entity and the auditor’s duty of confidentiality, in order to recognise the different provisions of laws, regulations, or relevant ethical requirements; and
  • Highlight that the auditor may have additional responsibilities under law, regulation or relevant ethical requirements, including possible documentation requirements and communicating to other auditors.

The amendments and ISA 250 (Revised) will be effective for audits of financial statements for periods beginning on or after 15 December 2017.

‘The changes to ISA 250 prompt the auditor to think about whether to report identified or suspected NOCLAR to an appropriate authority outside the entity, taking into consideration the provisions of laws, regulations, or relevant ethical requirements in their jurisdiction, and to consider the impact of NOCLAR on the audit,’ said James Gunn, managing director, professional standards.

There is also a staff-prepared At a Glance document, explaining the main changes from the extant ISA and other international standards, and basis for conclusions, explaining the IAASB’s rationale for its decisions.

The IAASB ISA 250 (Revised), Consideration of Laws and Regulations in an Audit of Financial Statements is available here

The IESBA Code of Ethics (NOCLAR) is available here

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